FB EDucator

Case closed for Rocket Lawyer, the online legal services startup that was getting sued by its rival LegalZoom over claims of false advertising and other Federal Trade Commission violations. The court has denied LegalZoom’s motion for a summary judgment, and has subsequently cancelled the hearing for the case. Judge Gary Allen, of the U.S. District Court for the Central District of California, says that LegalZoom “has failed to carry its burden” in trying to prove that a consumer would be misled by Rocket Lawyer’s ads — specifically those offering services claimed as free.

“[Rocket Lawyer’s] advertisements are not false, but rather are a truthful promotion of its free trial that could potentially distinguish its services from other companies by allowing customers to incorporate without paying any processing and filing fees,” Judge Allen writes.

We’ve embedded the full ruling below.

The case goes back about a year, to November 2012, when LegalZoom first filed its complaint, which covered a number of claimed violations of FTC regulations, including trademark infringement and unfair competition.

Today’s ruling focuses specifically on the advertising and the “free” claims made by Rocket Lawyer, with specific reference not just to how they are not really free claims but to how they potentially put LegalZoom into a negative light, with statements like “Zoom Charges $99, We’re Free.” The Judge decided that Rocket Lawyer is transparent in what it is offering to users. For example, as in the above statement:

“It is true that a customer can save the $99 charged by Plaintiff for its processing and filing fee by enrolling in the free trial offered by Defendant. And this comparison is further explained on Defendant’s website through a chart that presents a side-by-side comparison of the various prices associated with incorporation, including processing fees and state fees, that are charged by both Defendant and a ‘Competitor.’”

“LegalZoom’s motion was unsupported legally and factually,” noted Forrest Hainline, counsel for Rocket Lawyer. “LegalZoom’s lawsuit attempts to misuse competition laws to protect its uncompetitive market position.”

LegalZoom has been around since 1999 years and has itself been a disruptive force in the market by offering users online legal services for a fraction of the price that it might cost to get the same paperwork done by a physical lawyer. Services include legal help with starting businesses but also personal work, such as filing for a divorce online. It has raised $66 million in funding and has filed for a $120 million IPO.

Rocket Lawyer has been around since 2008 and has raised just over $53 million. While LegalZoom charges for forms, Rocket Lawyer has gone after disrupting that model by making forms free and charging for legal and advisory services around getting them completed. It has raised just over $53 million.

“Our mission is to make the law affordable and simple enough for everyone to to benefit from the protections of our legal system,” noted Charley Moore, Founder of Rocket Lawyer, in a statement. “We are willing and able to continue to fight for access to low-cost legal services, even when a bigger competitor like LegalZoom comes along to try to maintain the status quo. We applaud the decision of the court today as it validates our commitment to delivering the legal services people need in a way they can both afford and understand.”

We are reaching out for a response from LegalZoom and will update this post as we learn more.

Image: Flickr